September 2024 Market Summary

In today’s dynamic financial landscape, the importance of maintaining a diversified portfolio has become more critical than ever, particularly when considering the unpredictable nature of global markets.

A well-balanced portfolio that includes exposure to different regions and asset classes can help mitigate risks and seize opportunities as market conditions shift. The past year up to 6 September 2024, serves as a strong reminder of this strategy’s significance, with markets responding variably to geopolitical tensions, inflation pressures, fluctuating interest rates, and divergent regional growth patterns.

Market performance overview

Over the past year, several global markets have shown significant fluctuations due to a range of factors. The performance breakdown figures of key indices up to 6 September 2024 are:

• FTSE 100: +10.71%
• S&P 500: +23.24%
• Europe’s STOXX 600: +12.31%
• Japan’s Nikkei 225: +9.48% (although it faced some volatility towards the end of August)

UK and US insights

In the UK, inflation rose 2.2% in the 12 months to July 2024, slightly above the Bank of England’s 2% target where the rate had been since May 2024. A rise had been widely predicted, mainly due to prices of gas and electricity falling by less than they did a year before.

In the bond market, the UK attracted a record £110.7 billion in orders for a new 15-year gilt set to mature in 2040. This high demand reflects strong investor sentiment, partly driven by expectations that the Bank of England will reduce interest rates less sharply than the Federal Reserve in the coming year.

In the US, inflation fell below 3% for the first time since 2021, continuing its steady decline. While the Federal Reserve has not yet reduced interest rates, markets speculate that the central bank will begin to lower interest rates in September, depending on jobs data which is due to be released this month.

The so-called “Magnificent Seven” stocks are, for the first time, underperforming the rest of the S&P 500 index. The top performing stock Nvidia dropped 10% at the start of September, causing knock on effects on other global markets, yet is still up 118% in 2024.

Other economic developments

In Japan, the Nikkei 225 was impacted by global market movements, particularly after a sell-off at the start of August, which led to Japan’s worst market day in several years. A further drop in Nvidia stock in the US had a ripple effect, negatively impacting its suppliers in Japan, leading to another dip in the Nikkei late in the month.

China’s economy faced continued challenges, with manufacturing activity contracting for the fourth consecutive month in August. Low confidence among both businesses and consumers is hindering domestic consumption and overall recovery.

Europe’s STOXX 600 finished August at an all-time high, recovering from a six-month low earlier in the month, spurred by a global sell-off. Eurozone inflation fell to 2.2% in August, down from 2.6% in July, in line with expectations. Following a 25-basis point drop in the base rate in June (the first drop since 2019), the ECB will meet again on 12 September where it will decide whether further rate drops are required. The ECB target inflation level is 2%.